GOALS IN NEWYEAR
Aim to reach — and keep — these 11 financial resolutions.
The beginning of the year is the prime time to focus on what’s going on with your money. With the right plan in place, you can stick to your financial resolutions and end the coming year in a better place than you started it.
To help you get started, here are 11 financial resolutions to set, along with expert tips on how to keep them.
1. Refinance your mortgage and/or your student loans
While the coronavirus pandemic has wreaked havoc on many parts of life this past year, it has also provided some opportunities. For example, you can now secure record low mortgage rates, making this a prime time to refinance and lower your monthly payments.
As for student loan refinancing, federal student loans are in forbearance until Jan. 31, meaning interest is suspended and payments are not required. However, this does not apply to private student loans and you may want to consider refinancing these types of loans to lock in lower rates.
2. Pay down credit card debt
If you have credit-card debt, consider making it a goal to pay it off. There are a few approaches you can take, but two common strategies are:
• Paying off your highest debt first (the debt avalanche method)
• Paying off your smallest amount of debt first (the debt snowball method).
If you’re struggling with payments, consider credit counseling, a low-interest balance transfer, a personal loan or even debt settlement.
3. Can’t stick to a budget? Create a spending plan instead
Consider ditching the traditional budgeting method and create a spending plan instead, says Loreen Gilbert, an experienced wealth manager and president at WealthWise Financial Services.
“The concept of living on a spending plan instead of a budget can give you freedom and peace of mind,” Gilbert says.
As a general rule of thumb, you should start with a necessity bucket, which likely includes semi-fixed expenses such as rent, utilities, groceries and funding your savings accounts. After you’ve identified how much will need to for those expenses, you can create other spending buckets, such as a fun bucket, that the remaining funds can go toward.
4. Automate your savings
One of the easiest ways to build your savings is automating your contributions.
Most employers allow you to divide your paycheck so that different amounts go into different accounts. If not, you can likely set up automatic transfers with your bank.
5. Start an emergency fund
The new year is as good a time as any to start (or grow) your emergency fund. In general, experts recommend saving three to six months of living expenses. Start by opening a separate and dedicated high-yield savings account.
6. Boost your retirement savings
If your employer offers a 401(k) match, be sure you’re contributing enough to get the full match since it’s essentially free money. Another thing to consider is looking at where your money is being invested. Many experts recommend investing in a diverse portfolio of assets to reduce your risk but still achieve attractive returns.
Finally, it’s important to remember that the only way you get the market’s longterm average return of 10 percent is by holding through all the tough times.
“Your retirement savings will grow quicker if you pick a solid long-term plan and then stick with it through the good and bad times, but especially the bad times,” says James Royal, Bankrate investment and wealth management reporter. 7. Invest more
Don’t limit your investing to only making tax-advantaged retirement contributions.
If you already have an emergency savings account, you might consider setting up an investment account to invest for goals with specific time horizons, like early retirement or saving for a house.
8. Improve your credit score
Your credit score plays a critical role in determining whether you get access to financing and other financial services you need. Your credit score can influence your car insurance rates in some states, as well as how much you pay in interest when you get a loan.
Visit AnnualCreditReport.com to get a free copy of your credit report and score.
You’re typically only able to access one free report a year, but it’s since been increased to once a month until April 2021 as a result of COVID-19.
9. Cook more meals at home
Try meal subscription services, like Blue Apron, which give you the option of picking new recipes each week along with delivering perfectly measured ingredients straight to your door.
On the other hand, if you’ve turned to takeout as your go-to during this time, consider giving cooking a try and see how much you save.
10. Update your beneficiaries
Have you experienced a life-changing situation recently? If so, your beneficiaries might be out of date.
This includes checking your retirement and bank accounts, insurance policy and other financial accounts to make sure your beneficiaries are up to date.
Adding a beneficiary to your accounts is critical to ensure your assets will go to the person you intended them to. Additionally, it’s important to note that beneficiaries trump wills, so make sure the two documents are aligned in their directives.
11. Look for ways to boost your income
Sometimes, it’s less about savings and cutting back and more about increasing your income.
There’s a variety of ways you can increase your revenue streams. Freelance work, for example, is great for those who have a specific skill to offer others. But there are also less technical side hustles, like dog walking, to consider. Additionally, if you have a bit more money to front, then you could consider investing in rental properties.
By finding different ways to increase your revenue streams, you aren’t entirely dependent on one income source. Not only can that strategy help you make more money, increase your savings and reach your goals, it can also provide some protection if you lose your primary job.